LIC & LIT Listed Investment Companies (LICs) in 2017

So I'm finally ready to invest after swapping out a property for some reduced debt and looking at picking up next week:
AFI, BKI, MIR, MLT, QVE, WHF and VTS & VEU.

My investment time frame is 15 years and I will be looking to utilise DRPs.

I appreciate their is some duplication across this proposed portfolio but any other feedback welcomed.

 

@Martin73 , glad to learn you seem to have finally got the matter sorted out with your financiers.

As to your selections, it does appear to me you've settled on your approach. That is the main thing in my opinion as it's all about you - and your partner/family should you have one.

As to duplication, pretty hard to avoid when choosing LIC's but so long as you're comfortable with your decisions, it doesn't matter one whit what others think.

 

I am a novice and one with a much shorter time frame (my age). My LIC journey is quite recent and I hold 4 of your first 6..... I have ARG instead of AFI but so similar anyway. Maybe my standout difference is PMC.
I like SK’s response...... Some expertise there I feel

 

Thanks @SatayKing. Been reading and learning so much over many months from this thread and others it's pleasing to be finally on the journey.

Looking forward to those dividend cheques rolling in.

 

Nice mix to start with, you could consider a few international LICs to throw into the mix like FGG, TGG and PGF. My favourite is PMC, which pays out a bigger dividend than the others, but it’s price has surged lately and at a 10%+ premium it’s looking pretty expensive. Definitely one to keep an eye on though.

 

Well done Martin.

I assume you’re aware that VTS & VEU don’t offer DRPs.

I really like the combined holdings of VTS / VEU as they are cheap and include small caps and emerging markets but I just couldn’t get comfortable with them being domiciled in the US given the unknowns with Estate tax etc. So I’ve stayed with VGS which is domiciled in Australia.

As for emerging markets it’s the one area I’m prepared to pay the larger fee for a Mgr to avoid a lot of rubbish and higher risk stuff. Also I prefer a Mgr with a global mandate rather than say Asia only then leave it to the Mgr to decide where best to invest at a given time. Hence why I hold PMC. It has a global mandate but a strong tilt to Asia and occasionally a little other emerging market holdings. And the relatively reliable sometimes generous dividend plus franking is great particularly now we’re retired.

But at the end of the day SANF is the main thing regardless of what others say.

PS: Starting to tire of moving stuff to online storage. Shares done but a crap load of other stuff to eventually get done as part of overall Estate Plan and other general important stuff.

 

SANF? What’s that?

 

Sleep at night factor.

 

I meant to add that if NTA issues are a concern Platinum now also offer what are effectively active ETFs. They will always trade at or very close to NTA. They are different to PMC though in that income (no franking) is less of a focus compared to growth. And distributions generally only occur annually.

Anyhow if interested have a read here:

ASX Quoted Managed Funds - Platinum Asset Management

 

I like PMC though don't own it,my concern is how much of Platinum's success is attributable to Kerr Neilson?Should he retire or whatever how comfortable is everyone with the others he has in place,gather some key people have left over the last year.Appreciate feedback.

 

Key person risk is a factor to consider with PMC. Kerr Neilson, sometimes referred to as Australia’s Warren Buffet, is certainly a big part of Platinum”s success and is a key reason why quite a few people invest in his companies. I’d say PMC’s share price is likely to take a fair initial hit when he leaves (see what happened to HHV when Peter Hall left in December last year), possibly a big one if it’s at a significant premium at the time.

It’s one of the reasons why I wouldn't ever buy it at too high a premium, but I’m not too worried about it otherwise. Hopefully he’s imparted enough wisdom to those around him so that despite the initial share price hit, PMC’s actual performance will continue after his departure.

 

I am also looking to buy PMC. @monk @Globetrekker Regarding the comments re Kerr is he leaving or approaching retirement age?

 

That's a pretty sexy portfolio there Martin!

Well I think so anyway

 

Wikipedia says he was born in 1950, so he's 67 this year. I haven't heard any announcements or rumours about him retiring or leaving though, I was just answering @monk's question re what might happen when he eventually does. It could be tomorrow, or it could be 20 years from now (Warren Buffet is still going at 87).

Key person risk is just one of several potential risk factors to keep in mind when making an investment decision on any LIC (particularly when an LIC trades at a significant premium due to the skill or reputation of a single individual). You need to assess how big a risk you think there might be that he might leave in the short term and how big an impact that might have in the short and long term; and whether worrying about it will keep you up at night (SANF - copyright Nodrog).

 

Platinum Asset Management has $27 Billion FUM. Mgrs of this size don’t disappear in a hurry and have gotten too big for any one individual to carry serious key person risk. There might be a short term impact if Kerr Neilson retired / died but then I think it would be business as usual.

Hunter Hall which lost Peter Hall recently, mentioned earlier, is only a fraction of the size of Platinum so no comparison. And even there things seem to be sorting themselves out.

And if the Funds were shut down the proceeds are returned to investors. Another reason why not to pay a significant premium (preferably a discount) for LICs. If the company is wound up investors who purchased the LIC at a decent discount can actually do quite well out of it. Hence why Activists sometimes target LICs trading at persistent deep discounts.

So far over the long time frame we have held PMC my SANF has been good.

 

I’m not at all worried about the fund being shut down, and PMC is still my second-largest holding overall (though I won’t be buying any more at the current premium) so my SANF is good too. I do think the share price will take a hit when he eventually leaves, a few people I know (some who know far more about LICs than I do) got into PMC based on Kerr Neilson running the show. There may be a bit of a run for the exit based on people being worried about other people running for the exits. If it’s at a big premium at the time then I think the hit to share price could be decent (initially at least), if it’s at NTA or discount then I think the impact is likely to be much smaller, and possibly even a good short term buying opportunity!

 

I like your thinking

Saw this the other day - could be of interest....https://www.indiegogo.com/projects/pup-scan-the-world-s-fastest-pocket-scanner-home#/

 

That's not really the point. Managing key person risk is about understanding what would happen if, in this case, Kerr was hit by a bus, or car or plane or whatever, and planning this accordingly in your overall calculations.

You may know that Kerr has setup a quality process at Platinum whereby his presence is no longer what makes them succeed.

On the other hand, you may know Kerr picks every single stock using his patented wigi board, which no one else can use.

Whichever it is, or if it's somewhere in the middle, you need to plan and manage the risk before you start buying Platinum shares, and any other for that matter.

 

@Nodrog, can you confirm that if a LIC is sold off it is the post-tax NTA that people need to be worried about.

 

I managed to fill my boots yesterday with the exception of WHF - and did pick up VGS instead of VTS/VEU - thanks @Nodrog

Expecting the market to crash today....